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Economists ‘Can’t Understand’ Why Workers Can’t Get Paid More in a ‘Booming’ Economy

Mystery of the underpaid American worker

Once Obama won election, he dropped that promise, saying he had “more pressing” things to do before he could take that up. Eight years in office and he never tried. And the Democrats who had a majority during his first term never put that bill up for a vote, either. Meanwhile, the percentage of workers in unions during his eight years in office fell from 12.4 percent to 10.6 percent. That’s a decline of almost 15% in union members over that time under a man who campaigned as a friend of labor who would be walking the picket line with striking workers (something he never did while in office).

Now, ironically, we’re hearing complaints that the wage divide in America is a matter of “pressing” concern, but for eight years, Democrats ignored the pressing cause for that growing divide as employers took all the benefits of a restored economy for themselves — as they continue to do now in the wake of the Trump/Republican tax “reform” that was supposed to lead to higher wages as profits grew.

Economists typically ignore the role of unions in empowering workers even in the specific area where American unions are most focused, which is improving pay and benefits. Yet it hardly needs research to understand that if organized unions working under negotiated contracts have — as is the norm — meant higher pay and better benefits for their members, it compels employers who don’t want to have a union to offer competing pay and benefits to keep their employees from turning to a union for help. When unions, as today, are as weak as they are now, that threat no longer exists. And with that loss of a threat, all workers are at the mercy of tight-fisted employers.

Meanwhile, job mobility — supposedly the individual worker’s best way to win higher pay — is largely a joke in the US, because first of all, employers, who universally oppose a government health insurance program, are the main ones providing workers with health insurance, which workers lose if they are fired or leave the job (or go on strike), making it a powerful tool for serf-like domination. And the digital age means that a worker’s record, including any history of union activism, aggressive efforts to win higher pay or benefits, or taking legal action to defend what few rights an employee actually has, is all included on her or his file, making it hard for such outspoken workers to land a new job elsewhere.

Employment law is stacked against workers, with courts holding that employers can make it illegal for workers to discuss their pay with each other, and even saying that workers have no real right to their job. Absent a union contract, employment is “at will” on the part of the boss, who can fire anyone without cause, and the fired worker has no recourse. Prospective employers also can demand to know what prior employers paid an applicant, but an applicant for a job has know right to know what other workers on a job she or he is applying for get paid.

No wonder pay doesn’t go up when the labor market is tight. Employers are holding all the cards.

Economists don’t know this because power relations don’t fit into economic models, they really don’t care, and for the most part were never really workers. Most went to college and then into jobs at think tanks, Wall Street banks or universities where they earn decent livings, may have tenure (an unheard concept for ordinary workers!), and earn salaries, not hourly pay. They simply don’t “get it,” about being a working stiff.



story | by Dr. Radut